by Checking accounts have traditionally been a right of passage of growth in one’s financial future. While most of us start with a savings account that could have been gifted to us by a god parent or parent, when you open a checking account it is usually a sign that you have grown in some aspect of financial responsibility as a checking account can be used for such glorious tasks such as depositing a paycheck or even paying bills.
Even though it may be a right of passage don’t let the traditional banking fees eat away at your best possible financial future.
Big Bank Checking Accounts
When most people think of a checking account they think of the big banks. This is not to say that “everyone” does, it is merely to say that most think of the big 4 banks as they dominate market share (which is evaluated by value of deposits). The big 4 banks account for 34% of the total market share with Bank of America, Chase, and Wells Fargo each holding over 10% each of market share.
With these banks leading the way domestically and having branches on what may seem like on every corner in the major metro markets, consider the following fees you could be paying with anyone of the big 4:
- Bank of America – Checking fees can range from $0 to $25/mo.
- Chase – Checking fees can range from $0 to $25/mo.
- Wells Fargo – Checking fees can range from $0 to $30/mo.
- Citibank – Checking fees can range from $0 to $30/mo for their most common checking accounts.
On an initial review you will notice that the topline fees are strikingly similar and that you have the potential to pay $0 each month as well. As you look at this potential fee list, we invite you to check your account statement to see how much you are paying.
How can you get to $0 monthly with the Big Banks?
To help you continue growing towards your best financial future it is advantageous to minimize fees on items that are required in the modern world. Even though you might not need “checks” a checking account is certainly a necessity and if you can pay $0 then that means you can invest that money or maybe the monthly fees pays for some of your monthly fun (i.e. without banking fees you can enjoy Netflix guilt free).
To get to $0 with the big banks usually means you will need to meet one of the following requirements:
- Age Restriction: To attract a younger audience one of the most common methods is to offer a youth oriented account (i.e. one is generally under the age of someone who would have graduated college, around 22 or younger). This can be a good option to get the benefits of a big bank while you are young, but consider changing banks when you graduate to avoid the monthly fees.
- Direct Deposit: With Bank of America there is a checking account option that allows you to pay $0 monthly if you have at least one $250 direct deposit per statement cycle. This is a great option for those that are starting out, but if you are in the entrepreneurial world you might not have a direct deposit which can be a challenge with any of the banks to avoid the minimum monthly fee.
- Minimum Balance: The minimum balance requirements can have a wide range with such large requirements (i.e. Citibank has products that require a minimum $1,000,000 combined balances) or a bit more reasonable minimum balance requirements from BofA at $10,000 minimum balances. Still $10,000 isn’t a small amount to keep around and if it is sitting earning .1% or even less then that might not be helping you to reach your financial goals.
Each bank has multiple checking account options and can have different ways to get to the $0 monthly fees. When you are evaluating your checking account options make sure to clearly understand how you can get to $0 to make sure it fits within your financial profile.
Look at the Fine Print
Fine print and banking? Banks are notorious for the fine print and they will have a statement of fees (sometimes called a schedule of fees). Look at this document in detail to make sure you understand the fees that are possible. While it can seem troubling to do so, fees can eat up $100’s a year that could often be avoided. A few fees that you might want to specifically look at which are more common are:
- Overdraft Fees: These can be $35 or more per occurrence. Ask if there is a way to connect a savings account or even a credit card in the case of a low balance scenario to avoid this fee.
- Specialty Fees (i.e. wires): Wires can be $25+ per wire and can be used from a deposit in a real estate transaction and much more. If you need wires often find out if there is an account type which offers this for free or even a reduced cost.
Changing Times of Checking Accounts…Online Competition Can Give You the Win
While the big banks dominate branch locations Online Banks have developed powerful product offerings that help you to earn more on a monthly basis from the interest paid to having truly no fee options (not needing to worry about direct deposits or anything and pay $0 monthly). We certainly can dive into greater detail with the online bank checking account options, but as you are considering what you are paying for checking consider the following two leaders for online checking:
We started with CapitalOne many years ago when they were known as Ing Direct as they had great savings rates and they made it easy to save. The online banks are known for powerful apps and can allow you to do the majority of your banking…with the exception of making it easy to access cash.
Access to Cash
Having access to cash is one of the biggest drawbacks of online banks. The advent of digital payment services such as Venmo, Zelle, etc. make it a bit easier to make person to person payments without cash. When the need arises for paying traditional vendors most of the online banks allow you the ability to pay with services such as Apple Pay, Google Pay or Samsung Pay.
Understanding what you are paying for your checking account is a key part of your financial future. Whether you go with a big bank or with an online bank we invite you to keep tabs on fees to help you make the most of your hard earned money.
